EP 26: Yes, Cryptoassets Can Be Used as Collateral Against Loans. Just Ask BlockFi’s Zac Prince.

Zac Prince | CEO and Founder of BlockFi

Banks have been wary to count cryptocurrencies like Bitcoin and Ether as solid assets when generating loans, so BlockFi’s Zac Prince developed a new kind of lending platform that welcomes alternative assets.

Disclaimer: This is not a solicitation to sell securities, which is only done through appropriate disclosure documents and only to appropriately qualified investors.

Episode Summary

In 2015, Zac Prince started investing in Bitcoin and other blockchain technologies, and by 2017, cryptocurrency value in aggregate crossed the $100 billion mark. Prince was proud of his investments, but a curious thing happened when he listed the assets on a loan application for an investment property. The bank “freaked out,” according to Prince, and lenders accused him of being involved in illicit activities.

The timing proved serendipitous, however. Prince had already been exploring alternative lending business models and areas of the financial ecosystem in which banks are less active or not active at all.

“I had a light bulb moment,” he says. “Companies like SoFi, Lending Club, and Funding Circle were really successful at building big businesses in areas where banks weren’t active, and I realized the same thing was going to be true in the cryptocurrency market.”

With that, he founded BlockFi — a rapidly growing FinTech startup (and Purple Arch Ventures investment) that allows consumers to obtain loans using cryptocurrency as collateral. The company’s first product accommodates Bitcoin and Ether assets. BlockFi has also started developing other crypto-backed products, such as credit cards that award consumers in Bitcoin rather than cash or airline miles.

“Our investment isn’t so much a crypto play as an investment in a new type of lending platform,”says David Beazley, Managing Partner of Purple Arch, a venture fund that backs deals associated with Northwestern alumni. “Lending against volatile cryptoassets is a great idea because folks still need access to fiat currency to buy most things.”

Listen to this episode of Founders and Funders to learn more.

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Founders and Funders is a podcast where we discuss how entrepreneurs and investors work together to build great companies. Our guests — many of whom are connected with AVG as entrepreneurs, investors, managing partners, and fellows — are invited here to talk about the journey of building companies from incubation to early-stage investing and beyond.

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